We’ve known about struggling suburban malls for years, and we’ve had a front-row seat for the rise of ecommerce. But New York City, with its collection of retailers both chic and esoteric, seemed resistant to brick-and-mortar demise.
Traditional retail stores are vanishing at a pace that must leave landlords’ heads spinning. On the rare occasions that a new tenant moves in, it rarely involves shopping bags. Instead, we are seeing the rise of “experience” in retail, a shift to emotional connection that generally involves a lot less merchandise at ground level.
Experiential retail is part of a larger trend. Retailers are dashing for online safety; brick-and-mortar is increasingly becoming a call-to-action for online ordering.
It’s affecting suppliers, too. As retailers shrink stores and inventory, suppliers are forced to develop direct channels to consumers, no doubt causing channel conflict in their race to preserve revenue.
Which retailers and suppliers will build the deep connections with customers that survive the onslaught of Amazon? We’re taking bets. We also can't wait to see how retail space is repurposed: viz WeWork buying the Lord & Taylor building.
Radio Shack Still Exists?
Here’s a breakdown of major retail store closures expected to roll out over the next couple years. Kmart, Macy’s, and all of Starbucks’ Teavana stores may not come as a surprise. But who knew Crocs and Radio Shack still had so many stores to close?
Note to self: utilize all stray gift cards other than Amazon—soon!
Soho No Go
On the investment side of things, it’s not looking any better. Retail property that was eagerly snapped up just a few years ago is now failing to be filled by new stores.
Take SoHo for example: investors who spent almost a billion dollars to acquire retail-and condominium-centered buildings over the last six years are facing crazy vacancy rates, according to research by The Real Deal. Even buildings that haven’t changed hands recently are stuck in the transition between tenants. Retailers who are losing confidence in brick and mortar business are unwilling to pay top dollar to get into formerly fully occupied neighborhoods.
So what, exactly, qualifies as experiential retail? We nominate retailer-branded hotels, where we can experience sofa cushion wear and tear first hand before committing to purchase.
And it's happening right in our Meatpacking District neighborhood: Restoration Hardware's hotel was just approved. West Elm and Parachute are also looking to carve out a place in hotel world. And Muji is working on it, too (we’ve been known to steal a quick nap on one of their beanbags, so they’re already halfway there in our minds).
Despite the number of brands hopping onto this trend, there are still a number of issues to iron out, such as how to do promotions or partner with another company to even get into the space. Still, multi-purpose use of real estate makes a ton of sense. More mashups please!
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